VMIL increases profit despite Barbados bond

Securities dealer Victoria Mutual Investments Limited, VMIL, grew its profits to $398 million for its full year, despite taking a hit on the Barbados bond in its earlier quarters.

Its profit was 15 per cent higher year-on-year, performance the group credited to growth in both its capital markets and asset management divisions.

Last summer, under new Prime Minister Mia Mottley, Barbados announced plans to suspend bond payments to external creditors in an effort to restructure its debt while negotiating a lending agreement with the International Monetary Fund. VMIL took a hit from the decision in its second and third quarters, which negatively impacted on its net income by $105.4 million.

American rating agencies downgraded the country’s sovereign debt rating as a consequence. And, as required by generally accepted accounting practices, VMIL made a provision for the impaired bond.

At the time, the GOB bond was trading at 50 cents on the dollar but has since reclaimed some value and is now trading at 60 cents to the dollar.

“If it had not been for the credit loss provision on the Government of Barbados bonds, net profit for 2018 would have been $503 million, being 45 per cent over the comparative 2017 period,” said VMIL.

Annual revenue for the company, at $1.3 billion, was up by 35 per cent. VMIL said the increased revenues came from a two-thirds growth in its net fees and commissions to $827 million, arising from business done by its capital markets and asset management units.

The capital markets division arranged $19.3 billion worth of transactions for clients over the year.

Operating expenses grew 33 per cent to $662.3 million, excluding the provision for credit losses on financial assets. The extra spending was due mainly to VMIL’s higher staff costs and the implementation of its new investment management system, or OPICS, which will allow the company to “seamlessly and efficiently” launch various other asset management products.

VMIL wrapped up the year with $21.6 billion of balance sheet assets – plus a further $24 billion of off-balance sheet assets under management – and net value of $2.7 billion.